| National Assoc of Realtors says "Sell Now" |
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Jon
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| National Assoc of Realtors says "Sell Now" |
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Finally someone within the real estate industry is acknowledging that the housing market is peaking. NAR came out Tuesday and made some statements many did not expect. First it said home sales would trend down from these record levels, that the housing market was “close to a peak.” Wow. That is some admission from inside the industry.
More than that, NAR suggested that now was a good time to go ahead and sell if you were thinking of doing it, taking advantage of the high prices. NAR then advised to wait a year, however, before buying your next home to get a better price when the market softens. That is pretty stark in its view of where the market is. Based on this, NAR is not saying it is close to a peak, it is saying the peak is here.
Should anyone follow this advice? We agree the market is peaking; we feel it has already peaked or at least the tracks are laid and it is starting down them. Not a major crash for the entire market as some seem to think; any crashes will be limited in area to those levels that got way overheated and typically see pretty severe swings in the market, e.g., parts of California, Arizona, Florida, New York, South Carolina, etc. Those markets heat up and cool down in faster cycles than the rest of the country. We recall stories from Silicon Valley back in 2001 where sellers were praying the deal would close because so many buyers were walking contracts as the tech boom further crashed and the nation struggled through recession. Those same folks are saying today ‘if only we would have waited a year or so we would have made another million.’ No kidding; we personally know more than a few that were in that position. The point: the majority of the markets that are considered overheated now are ones that overheat and cool off much more frequently than the rest of the country.
That leave you wondering. If you sell now and sit for a year, prices damn well better fall significantly if you are going to come out ahead. Why? Because rents are not dropping, and if you sign a year lease now you are not going to cut a great deal. You are going to lock in at a high monthly rate and burn up a lot of your profits paying rent. Thus prices better plunge in order for you to make out on that deal. In short, this strategy might work in those areas that are overheated and will fall harder versus the rest of the country where prices may soften, but they are not going to crash. That makes this a risky gambit for most would be sellers.
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Thu Aug 11, 2005 3:46 am |
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forexdaytrading
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Location: Miami, Florida, USA
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Jon, maybe we won't have such a soft landing. A crash is certainly possible. The increase in home prices that we have experienced in the United States since 1997 is a freak occurrence. The scary thing is that people are acting as if it was the norm. Statistics show that many of these irrationally exuberant real estate fans are people that got burned in the 2000 stock market bubble. In the past, whenever a market or commodity has experienced a parabolic increase in price (like the graph below shows), it has come crashing down later.
The chart below is from Robert Shiller's "Irrational Exuberance" (second edition). It shows the inflation adjusted prices of homes in the US versus the factors that influence the housing market. Notice that the parabolic increase in real estate prices since 1997 is not justified by either population growth or an increase in buliding costs.
forex-day-trading.com/Graphics/historical-housing-prices.gif
Enjoy!
Dan
Last edited by forexdaytrading on Thu Nov 01, 2012 3:41 pm; edited 1 time in total |
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Thu Aug 11, 2005 4:39 pm |
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bong12187
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There are investors and there are speculators. What are the difference between the two? Speculators are those who buys property in hope that the market will go up so that they can sell the property with profits. This is what we are seeing now and it is rampant all over the US. Now, there are investors who don't care whether the market is up or down. Investors look mainly for cash in cash return for their investment. Phantom income also play a big role with their decision making process.
So what am I trying to say here? It really doesn't matter whether the housing market continue to bubble or bust to investors because they've already factor in those elements before they bought the property. I've bought properties in 2002/03 and i've bought property in Dec 2004 and Jul 2005 and they are both making me money. Although, my cash on cash return was higher with those properties I bought in 2002/03 (during the bust), I can't complain of 40-50% (and expect to go higher) cash on cash return for the other properties I bought recently (during the bubble).
Now some people look at the housing market as REITs. REIT is nothing but a mutual fund or stocks and like any stocks out there they go up and down. IF they go up, well, that is nice and dandy. But what if they tank? what can you do? Well, you can pray, or you can write a letter to the directors or you can withdraw it. With real estate who concentrate with passive income or positive cashflow, they can aggressively look for tenants, they can fix up the place, they can remortgage etc. etc. So there is a big difference between the two. Bottom line, real investors in real estate should not care whether there is a housing bubble or bust.
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Thu Aug 11, 2005 7:05 pm |
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MattL
Senior Member
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Joined: 25 Jun 2005
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I agree that the market is at or near it's peak.
I wouldn't advocate selling as a way to time the market though. If you are considering selling within the next 5 years or so to downsize now might be a good time to do it.
I wouldn't sell and sit out of the market for a year or two then try to buy back in at the same level of house. That's speculation and not worth the risk.
Debt Elimination
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Tue Aug 16, 2005 4:25 pm |
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